COLLEGE OF ACCOUNTANCY

MIDTERM EXAMINATION
ACCTG 153A
INSTRUCTIONS:
o Make a summary of answers and show your solution on a separate sheet of paper.
o Submit to my messenger account the picture of summary of answers and solutions.

Multiple Choice
1) Which of the following statements is incorrect?
a. Account is the basic storage of information in accounting.
b. Posting is the process of classifying the effects of recorded events on the accounts.
c. Recording is the accounting process in which financial statements are prepared.
d. Accounting affects all economic organizations, whether private entity or government
entity and whether profit-oriented or non-profit organization.
2) Accounting has been given various definitions, which of the following is not one of
those definitions
a. Accounting is a service activity. Its function is to provide quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are, in part of at
least, of a financial character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and
communicating the results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
3) Under the accrual basis of accounting,
a. income is recorded only when cash is received and expenses are recorded only
when cash is paid.
b. liabilities, owner's capital, and drawings all have normal credit balances.
c. all real accounts have normal debit balances.
d. income is recorded in the period it is earned and expense is recorded in the period it
is incurred, irrespective of when cash is received or paid.
4) External users of general-purpose financial statements include all of the following
except
a. Creditors
b. Investors
c. Owners who are directly involved in managing the business
d. Lenders
5) Which of the following is a purpose of preparing an unadjusted trial balance?
a. to facilitate the preparation of the financial statements
b. to provide reasonable assurance that all accountable events are recorded
c. to facilitate the preparation of adjusting entries
d. to provide reasonable assurance that all nominal accounts are zeroed-out
6) When preparing closing entries, which of the following accounts is debited when closing
to the “Income summary” account?
a. Owner’s drawings
b. Sales
c. Salaries payable
d. Depreciation expense
7) If the “Income summary” account has a credit balance after all income and expense
accounts are closed, there is
a. profit.
b. loss.
c. owner’s drawings.
8) an error. Which of the following adjustments can be reversed in the next accounting
period?
a. Adjusting entry to take up depreciation expense
b. Adjusting entry to record bad debts expense
c. Adjusting entry to record accrued interest income
d. All of these

MIDTERM EXAMINATION
9) Which of the following is not an adjusting entry?
a. An entry to take up bad debts expense at the end of the period.
b. An entry to take up depreciation expense for the period.
c. An entry to recognize interest expense for the period.
d. An entry to record the cash acquisition of equipment.
10) A trial balance
a. proves that debits and credits are equal in the ledger.
b. supplies a listing of open accounts and their balances that are used in preparing
financial statements.
c. is normally prepared three times in the accounting cycle.
d. all of these.
11) It is a formal record where transactions are initially recorded.
a. Journal entries c. Master file
b. Ledger d. Journal
12) It is the basic storage of information in accounting.
a. Journal entry c. Debit or Credit
b. T-account d. Account
13) Which of the following is a recordable event or item?
a. Changes in managerial policy
b. The value of human resources
c. Changes in personnel
d. None of these
14) Errors revealed by a trial balance are
a. those errors resulting from transposition but not transplacement.
b. those errors resulting from either transposition or transplacement.
c. transplacement and transposition errors on both sides of a journal entry.
d. those errors which that have caused the total debits and total credits to be unequal.
15) An accrued revenue can best be described as an amount
a. collected and currently matched with expenses.
b. collected and not currently matched with expenses.
c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.
16) Bank statements provide information about all of the following except
a. checks cleared during the period.
b. NSF checks.
c. bank charges for the period.
d. errors made by the company.
17) Which of the following items would be added to the book balance on a bank
reconciliation?
a. Outstanding checks
b. A check written for P63 entered as P36 in the accounting records
c. Interest paid by the bank
d. Deposits in transit
18) In preparing a bank reconciliation, interest paid by the bank on the account is
a. added to the bank balance.
b. subtracted from the bank balance.
c. added to the book balance.
d. subtracted from the book balance.
19) In preparing a monthly bank reconciliation, which of the following items would be
added to the balance reported on the bank statement to arrive at the correct cash
balance?
a. Outstanding checks
b. Bank service charge
c. Deposits in transit
d. A customer's note collected by the bank on behalf of the depositor
20) Bank reconciliations are normally prepared on a monthly basis to identify adjustments
needed in the depositor's records and to identify bank errors. Adjustments should be
recorded for
a. bank errors, outstanding checks, and deposits in transit.
b. all items except bank errors, outstanding checks, and deposits in transit.
c. book errors, bank errors, deposits in transit, and outstanding checks.
d. outstanding checks and deposits in transit.

MIDTERM EXAMINATION
21) On May 1, 2004 a company purchased a new machine which it does not have to pay
for until May 1, 2006. The total payment on May 1, 2006 will include both principal and
interest. Assuming interest at a 10% rate, the cost of the machine would be the total
payment multiplied by what time value of money factor?
a. Future value of annuity of 1
b. Future value of 1
c. Present value of annuity of 1
d. Present value of 1
22) Entity A needs guidance in accounting for its inventories. Entity A should refer to
which of the following?
a. PAS 1
b. PAS 2
c. PAS 7
d. PAS 8
23) Goods in transit which are shipped f.o.b. destination should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.
24) Which of the following cost flow formulas can be applied by an entity whose
inventories that are purchased last are sold first?
a. LIFO d. b or c
b. FIFO e. None of these
c. Weighted average cost
25) What is the effective interest rate of a bond or other debt instrument measured at
amortized cost?
a. The stated coupon rate of the debt instrument.
b. The interest rate currently charged by the entity or by others for similar debt
instruments (i.e., similar remaining maturity, cash flow pattern, currency, credit
risk, collateral, and interest basis).
c. The interest rate that exactly discounts estimated future cash payments or receipts
through the expected life of the debt instrument or, when appropriate, a shorter
period to the net carrying amount of the instrument.
d. The basic, risk-free interest rate that is derived from observable government bond
prices.
In preparing its bank reconciliation for the month of February, James Company has
available the following information:
Balance per bank statement, February 28 P18,025
Deposit in transit, February 28 3,125
Outstanding checks, February 28 2,875
Check erroneously deducted by bank from James'
account, February 10 125
Bank service charges for February 25
26) What is the corrected cash balance at February 28?
a. P18,125
b. P18,150
c. P18,275
d. P18,400
The information below is from the books of the Seminole Corporation on June 30:
Balance per bank statement P11,164
Deposits in transit 1,340
Bank charges not recorded 16
Note collected by bank and not recorded on books 1,120
Outstanding checks 1,100
NSF checks - not recorded on books nor redeposited 160
27) Assuming no errors were made, how much is the cash balance per books on June 30
before any reconciliation adjustments?
a. 11,404
b. 10,980
c. 10,460
d. 11,440

MIDTERM EXAMINATION
At the end of the current year, the prepaid insurance account showed a debit the balance
of P5,000; the balance at the beginning of the year was P6,000, and during the year the
insurance premiums paid amounted to P8,000.
28) Assuming insurance premium payments are initially entered in the prepaid insurance
account ,the adjusting entry at the end of the year would include:
a. debit prepaid insurance P9,000
b. credit prepaid insurance P1,000
c. debit insurance expense P7,000
d. debit insurance expense P9,000
At the beginning of the period, a business has a cash balance of P20,000. During the
period, total cash collections and total cash payments amounted to P100,000 and
P70,000, respectively.
29) How much is the ending balance of cash?
a. 10,000
b. 30,000
c. 50,000
d. 70,000
30) If the ending balance of accounts receivable is P100,000 and the total debits and
credits to that account during period were P60,000 and P40,000, respectively, the
beginning balance must be
a. 0
b. 20,000
c. 80,000
d. 120,000
JG Company had an accounts receivable balance of P40,000 on December 31, 2001, and
P65,000 on December 31, 2002. The company wrote off P10,000 of accounts receivable
during 2002, and collected P2,000 on an account written off in 2000. Sales for the year
2002 totaled P520,000. All sales were on account.
31) The amount collected from customers on accounts receivable during 2002 was
a. P487,000.
b. P510,000.
c. P485,000.
d. P495,000.
RGI Company had an accounts receivable balance of P45,000 on December 31, 2001, and
P60,000 on December 31, 2002. The company wrote off P12,000 of accounts receivable
during 2002, and collected P2,500 on an account written off in 2000. Sales for the year
2002 totaled P550,000. All sales were on account.
32) The amount collected from customers on accounts receivable during 2002 was
a. P535,000.
b. P538,000.
c. P523,000.
d. P525,500.
Before year-end adjusting entries, Bass Company's account balances at December 31,
2004, for accounts receivable and the related allowance for uncollectible accounts were
P700,000 and P45,000, respectively. An aging of accounts receivable indicated that
P62,500 of the December 31 receivables are expected to be uncollectible.
33) The net realizable value of accounts receivable after adjustment is
a. P682,500.
b. P592,500.
c. P637,500.
d. P655,000.
The following information is available for Reagan Company:
Allowance for doubtful accounts at December 31, 2003 P 8,000
Credit sales during 2004 400,000
Accounts receivable deemed worthless and written
off during 2004 9,000
As a result of a review and aging of accounts receivable in early January 2005, however, it
has been determined that an allowance for doubtful accounts of P9,500 is needed at
December 31, 2004.
34) What amount should Reagan record as "bad debt expense" for the year ended
December 31, 2004?
a. P8,500 c. P10,500
b. P9,500 d. P17,500

MIDTERM EXAMINATION
On December 31, Central Savings & Loan discounted a 3-month, P70,000, non-interest-
bearing note dated October 31, at 12 percent.
35) How much is the proceeds from the discounting?
a. 63,900
b. 48,550
c. 30,380
d. 69,300
A trial balance before adjustments included the following:
Debit Credit
Sales P425,000
Sales returns and allowance P14,000
Accounts receivable 53,000
Allowance for doubtful accounts 760
36) If the estimate of uncollectibles is made by taking 1% of net sales, the amount of
Doubtful Accounts expense.
a. P3,350. c. P4,250.
b. P4,110. d. P4,870.
37) If the estimate of uncollectible is made by taking 10% of gross account receivables,
the amount of doubtful accounts is
a. P4,540. c. P5,224.
b. P5,300. d. P6,060.
38) A 10 percent, P3,000, 3-month note receivable discounted at 12 percent for 2 months
will result in net proceeds of
a. P3,075.00.
b. P3,013.50.
c. P3,000.00.
d. P3,005.25.
Grant Company accepted a P400,000 face value, 6-month, 10 percent note dated May 15
from a customer. On that same date Grant discounted the note at Eagle National Bank at
a 12 percent discount rate.
39) How much cash should Grant receive from the bank on May 15?
a. P400,000
b. P396,000
c. P394,800
d. P387,200
40) Dark Co. recorded the following data pertaining to raw material X during January
2004:
Date Units Unit cost
1/1/04 On hand 3,200 P2.00
1/11/04 Issue 1,600
1/22/04 Purchase 4,000 P2.35
The moving-average unit cost of X inventory at January 31, 2004 is
a. P2.18.
b. P2.22.
c. P2.25.
d. P2.35.
Gonzaga Company uses the weighted average method to determine the cost of its
inventory. Gonzaga recorded the following information pertaining to its inventory:
Units Units cost Total cost
Balance 1/1 160,000 60 9,600,000
Sold on 1/15 140,000
Purchased on 1/31 80,000 90 7,200,000
41) What amount of inventory should Gonzaga report in its January 31, 2005 balance
sheet?
Perpetual
a. P8,400,000
b. P7,000,000
c. P8,600,000
d. P7,200,000
42) What amount of inventory should Gonzaga report in its January 31, 2005 balance
sheet?
Periodic
a. P7,000,000
b. P8,400,000

MIDTERM EXAMINATION
 c. P9, 000,000
d. P7,400,000

The following information is available for the Becca Company for the three months ended
June 30 of this year:
Inventory, April 1 of this year ........ P1,200,000
Purchases ................................ 4,500,000
Freight-in ....................... 300,000
Sales ....................... 6,400,000
43) The gross margin was 25 percent of sales. What is the estimated inventory balance at
June 30?
a. P880,000
b. P933,000
c. P1,200,000
d. P1,500,000
EC’s inventory at December 31, 2006 was P2,500,000 based on physical count priced at
cost and before any necessary adjustments for the following:
• Goods costing P100,000, shipped FOB shipping point from vendor on December 30,
2006 was received and recorded on January 5, 2007.
• Goods in shipping area were excluded from inventory although shipment was not made
until January 4, 2007. The goods billed to the customer FOB shipping point on December
30, 2006, had a cost of P400,000.
44) What amount of inventory should be reported by EC in its December 31, 2006 balance
sheet?
a. 3,000,000
b. 2,900,000
c. 2,600,000
d. 2,500,000

HC uses the FIFO retail method of inventory valuation. For the period, the following
information are available:
COST RETAIL
Unsold Merchandise at the beginning P24,000 P60,000
Purchases of goods 120,000 220,000
Net mark ups 20,000
Net mark downs 40,000
Sales of goods 180,000
45) If the lower or market rule is disregarded, what would be the estimated cost of ending
inventory?
a. 38,400
b. 40,000
c. 41,600
d. 48,000

On September 30, 2005, ABC Company discounted at the bank a customer’s P5,000,000
6-month 10% note receivable dated June 30, 2005. The bank discounted the note at
12%.
46) The proceeds from this discounted note amounted to
a. P5,092,500
b. P4,842,000
c. P5,250,000
d. P5,170,000

Hero Company assigned P400,000 of accounts receivable to Halo Company as a security

for a loan of P335,000. Hero company charged a 2% commission on the amount of the
loan; the interest rate on the note was 10%. During the first month, Hero collected
P110,000 on assigned accounts after deducting P380 of discounts. Hero accepted returns
worth P1,350 and wrote off assigned accounts totaling P2,980.
47) How much cash did Hero receive from Halo at the time of the transfer?
a. 301,500
b. 327,000
c. 328,300
d. 335,000

MIDTERM EXAMINATION
Data concerning the cash records of SUPER Company for the months of September and
October 2016 follow:
September October
Book balance 2, 258, 000 ?
Total cash receipts per book 1, 400, 000
Total cash disbursement per book 2, 400, 000
Bank balance 2, 100, 000 ?
Total debit in the bank statement 2, 500, 000
Total credits in the bank 1, 200, 000
NSF Check 60, 000 40, 000
Collection of accounts receivable not
recorded by the company 30, 000 50, 000
Erroneous bank charge 10, 000 18, 000
Erroneous bank credit 7, 000 9, 000
Understatement book disbursement 90, 000 120, 000
Deposit in transit 130, 000 369,000
Outstanding check 95, 000 30, 000
48) How much is the unadjusted book balance of on October?
a. 2,258,000
b. 1,258,000
c. 3,258,000
d. None of these
49) How much is the unadjusted book balance of on October?
a. 3,400,000
b. 800,000
c. 2,100,000
d. None of these
50) How much is the adjusted cash in bank balance in September 30?
a. 2, 138, 000
b. 2, 170, 000
c. 2, 102, 000
d. 1, 898, 000
51) How much is the adjusted cash receipts on October 31?
a. 1, 420, 000
b. 1, 390, 000
c. 1, 450, 000
d. 1, 382, 000
52) How much is the adjusted cash in bank balance October 31?
a. 1, 148, 000
b. 1, 118, 000
c. 1, 178, 000
d. 1, 110, 000
On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of
P1,000,000 and accumulated depreciation of P300,000 in exchange for cash of P100,000
and a noninterest-bearing note receivable of P800,000 due on January 1, 20x4. The
prevailing rate of interest for this type of note is 12%.
53) How much is the present value of note on January 1,20x1?
a. 569,424
b. 637,767
c. 714.286
d. 800,000
54) How much is the interest income in 20x1?
a. 68,331
b. 76,532
c. 85,714
d. 96,000
55) How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000
b. 569,424
c. 637,755

MIDTERM EXAMINATION
 d. 714,286

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of
P20,000,000 and accumulated depreciation of P7,000,000 in exchange for a noninterest-
bearing note receivable of P8,000,000 due in 4 equal annual installments starting on
December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for
this type of note is 12%.
56) How much is the present value of note on January 1,20x1?
a. 6,074,699
b. 4,803,663
c. 5,652,783
d. 5,868,633
57) How much is the interest income in 20x1?
a. 758,946
b. 678,334
c. 728,964
d. 704,236
58) How much is the current portion of the receivable on December 31, 20x1?
a. 1,271,036
b. 1,423,560
c. 3,380,102
d. 1,594,388
59) How much is the carrying amount of the receivable on December 31, 20x2?
a. 4,803,663
b. 3,380,102
c. 6,074,699
d. 6,000,000
Miller Company needs an estimate of its ending inventory balance. The following
information is available:
Cost Retail
Sales revenue ............................. P180,000
Beginning inventory ....................... P 35,000 62,000
Net purchases ............................. 100,000 135,000
Gross margin percentage ................... 30%
60) Given this information, when using the gross margin estimation method, ending
inventory is approximately
a. P1,000.
b. P9,000.
c. P19,000.
d. P11,650.

“Most people don’t fail – they quit. They give up on their dreams and blame
fate and bad luck. Too late they realize they gave up too soon.”
- From the book, “How to control your Life”
– by R. Sieger
“
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EXAMINATION===================================

MIDTERM EXAMINATION